Naspers has taken another big step towards the listing of its international internet assets onto the Euronext stock exchange in Amsterdam. The shares jumped 4% on the news that by mid July shareholders will be able to trade these assets in a new as yet unnamed business. CEO Bob van Dijk takes us through the key dates and implications for shareholders, especially those in South Africa. – Alec Hogg
Bob I was really interested to see that there is pretty good progress now going on with the listing in Amsterdam.
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Yeah I know so since the announcement we’ve obviously been working hard to get ourselves ready to be able to execute and at least say that we have been making good progress. We are on a relatively near-term timeline and we’re excited about making it a reality.
And the dates, maybe you could just take us through what shareholders can anticipate now and what they should be marking in their diary.
Yeah absolutely. So there are a few key points and a key one is the extraordinary general meeting that we are organising on the 28th of June in Cape Town where we are going to be proposing the transaction to our shareholders. Shortly after that we are going to be publishing a prospectus where we give a lot of detail about the new company. Then there is a period of time where we’ll spend our time and energy speaking to our investors and talking about the mechanics of the transaction. But as well about the exciting company they can now invest in. And then the intention is to have the listing completed on the 17th of July, which is a Wednesday.
And you haven’t got a real name yet, I see you still calling it NewCo.
We’re close but we’re not quite there. So we hope to come out with that in the next few weeks.
How are you going at that process, it’s quite interesting the whole process of finding a new name do you ask your staff. do you bring in consultants.
Yeah, we’ve actually used the whole range of different sources of inspiration and definitely also from our staff. I see from a lot of angles and then actually the more demanding work starts as you want to make sure that whatever you choose is something that you can get to right before you can get the right trademark protection and get the right domain names and we’ve been working through that for a number of options in the last weeks and months.
So clearly you’re going to have to have a new name before you list on the 17th of July.
Yes we will need to to get going.
What happens then to people who are sitting with Naspers shares today. There is also an inward listing into the Johannesburg Stock Exchange. Do they get new script.
So what happens. The technical way it works is the capitalisation issue. So basically our shareholders get something called an M share which automatically converts into a share in a new company. Or alternatively if they and this will only be relevant for a small minority. But if they decide to prefer to receive more Naspers shares rather than NewCo shares they can receive that. And that is particularly relevant for South African individual investors because if you are not an institutional investor and you are resident in South Africa you would actually be bringing forth your capital gains that you’ve made on Naspers by accepting NewCo shares. That might still be attractive for people to do but we wanted to at least give the opportunity to not have to deal with that time shift of the capital gains tax. So people who say I don’t want to do that they can elect to receive more Naspers shares.
So if you do that you’re going to have to pay capital gains in short.
I mean a couple of gains you would eventually pay anyway but then you will have to pay them when you accept the shares. So if you don’t want that you have the option to elect more Naspers shares and then you won’t pay that capital gains tax at that point in time.
That’s quite a significant issue that that you’ve been looking at. But I guess so are the costs of doing all of this, the tax implications for instance for yourselves.
So it is really relatively tax neutral. I think there is one meaningful tax component that the South African tax authorities will receive and that’s a big amount, there is a shared transfer tax which is a rather modest percentage but over the significant amount that does add up to a meaningful contribution to the tax authorities but it’s relatively tax neutral.
About a billion rand if I recall from the numbers that have been disclosed.
I don’t quite know what the latest numbers are. I thought it was a little bit smaller but it’s a meaningful amount.
It’s meaningful for the Treasury which needs all the money it can get at the moment.
And generally thats the way we think about tax because we think this transaction is going to be very creating for our shareholders and the fact that there is a tax component that we pay to South Africa. I think that we contribute to society that way.
Have you had more interest from international investors now that you are moving to Amsterdam or moving the international assets to Amsterdam. I ask this because that presumably was the intention in the first place.
Yeah that’s been a main driver of doing this and I must say I’ve been really encouraged with what we’ve seen in terms of interest so far. And from different angles. So there’s actually a large amount of active capital that is basically targeted for European equities for example and now we are European or global company but now also have a European equity to reflect that and you see investors say, well what you are is fundamentally a global technology company , you’re high growth, your large cap and you’re profitable. That’s extremely scarce in Europe. And so that’s very attractive for large European fund investors to put in their portfolios but also global tech investors that have been historically focused on growth markets but more focused on mature markets. This fits our bill really well and it’s something we want to learn more about.
So that’s been very positively received.
We’ve seen the Naspers share price come under a bit of pressure recently. Is that due to the wind that we’re seeing affecting Tencent in China.
Yes. So I don’t know much you follow the general Chinese stock market. But on the back of the new intensification of the trade war between the US and China, about all Chinese stocks have had a tough time. And it’s frankly been on many dimensions a bloodbath. I think Tencent has probably done better than average but it has definitely had an impact which is interesting because if you look at what the core activities are and where they make their money it’s really around digital goods in country right, so they’re not influenced by import export, there’s no physical goods, there’s no cutbacks there. It’s not a hardware business. So I think the business model of Tencent and also actually if you look at our investments in the US with Letgo, it is very much a domestic business buying and selling used goods within the borders so there’s no reason why sanctions would be an issue.
But I think market sentiment is an issue and we are affected by it as everybody else is. I think today we’ve seen a very favourable reaction to the announcement of the transaction. It was a good day.
How are you seeing things going forward, Bob. Given that this trade war is happening between China and America. But it is clearly influencing South African investors as well through the Naspers share.
So one of the things that we had done and are suited as well is that we don’t take a short term perspective, I think in the end it has huge benefits from global trade that is actually beneficial to all parties involved. Think restrictions on those are definitely not beneficial for anybody and because of that logic I’m sure there will be short-term friction and trouble, and associated market sentiment but I think over time as it benefits all sides I think common sense will prevail and some solutions will be found and we don’t invest for tomorrow, we invest for the years ahead. In the short term there will be some turbulence but in the long term I’m sure things will be resolved.
And so from a South African investor’s perspective just to really recap they’re going to have stock in Naspers on the JSE and in NewCo. What is the split going to be like, in other words for every one Naspers shares are you going to get more NewCo share.
Yes. So the situation will be that the current Naspers shareholders will hold sort of around to 25-27% of NewCo so that how it will work out. And if you read the circular you can see how the exact comps are on the shares, it is a somewhat complicated story but effectively about a quarter of the company of the NewCo will be in the hands of our current Naspers shareholders.
